Money

You’re in the market for a big-ticket item such as renovation materials or a major appliance and then you see an advertisement for just what you need with a headline like this: NO MONEY DOWN, NO PAYMENTS OR INTEREST FOR 12 MONTHS. Well, that certainly is enticing — but “don’t pay: deals can end up costing you a lot more than you bargained for if you aren’t aware of all the terms and conditions attached to them.

Deferred payment options are a popular promotional tool for many retailers, and an uninformed consumer can get hit with some hefty fees if the purchase item isn’t paid off within the promotional period. Even if just one cent is left unpaid after the payment due date, you will usually be charged interest on the whole amount of your original purchase. And because most “don’t pay” deals are financed through financial institutions, they usually involve accepting a retail credit card with annual interest rates often in the 20 to 30% range. As well, most of these promotions include additional administration or merchant fees (except in Québec) that can amount to $100 or more and are tacked on at the moment you make your purchase.

Here are two typical examples of “don’t pay” deals that look good until you read the small print.

1. Promotion:

No interest if paid in full within six months

Minimum $299 purchase

No annual fee, merchant fee or administration fee

Small print:

Annual interest rate of 28.8%

Interest accrues from purchase date and is waived if each minimum monthly payment is made by due date and the purchase price is paid in full by the plan expiration date

If no payments are made or the balance is not paid by the expiration date, interest will be charged at 28.8% per annum.

2. Promotion:

18 months, no payment, no interest

Minimum $250 purchase

No interest accrues during the promotional period.

Small print:

Annual interest rate of 29.9%

Merchant fee of $129.95 is added to the purchase

No interest accrues and no payments required during the promotional period

If the balance is not paid in full by the promotional due date, the unpaid balance is converted to a regular credit card purchase

A preferred rate will apply at 29.9% on the outstanding balance and a deferral fee of $42.50 will be charged

Minimum monthly payments of greater of 3.5% of the outstanding balance or $10 are due.

It pays to look very carefully into “don’t pay” deals before you sign on the dotted line. Take the same care with your overall financial life by getting good advice from your professional adviser.